Glossary

P

Paper Money

Certificates of various denominations generally recognized and accepted as a medium of exchange within a nation and elsewhere. Paper money is issued and backed by national governments (the Japanese yen, the English pound, etc.) or, in the case of the euro, by a group of governments.

Peak

Pension Fund

An account established by a business to fund retirement
benefits for its workers. Pension funds invest in stocks, bonds, mutual funds, and real estate.

Per Capita Gross Domestic Product (GDP)

The total market value of all final goods and services produced in an economy in a given year divided by the population.

Perfect Competition

A market structure in which a large number of relatively small firms produce and sell identical products and in which there are no significant barriers to entry into or exit from the industry. Firms in perfect competition are price takers and in the long run will earn only normal profits.

Periodic Income

Money received but not earned on a regular schedule—for
example, from occasional baby-sitting jobs, summer jobs, and gifts from relatives.

Personal Distribution of Income

A classification of the income received by individuals or families; shows the number of people in various income categories, ranging from those receiving the highest level of income to those receiving the lowest.

Personal Finance

Personal Finance Economics

A good that is used in the production of final goods and services.

Personal Resources

The time, money, and skills that a person has.

Phillips Curve

Physical Capital

An asset used in production that is made by humans, but is non-human.

Planned Spending

Thoughtful, deliberate spending, reflecting a consumer’s judgment that the benefits to be obtained warrant the costs to be paid.

Portfolio

A person’s or an institution’s collection of savings and investments.

Positive Externality

A beneficial or positive side effect that results when the production or consumption of a good or service affects the welfare of people who are not the parties directly involved in a market exchange. Sometimes referred to as "third-party benefit" or "spillover benefit," it is a benefit obtained without compensation by third parties from the production or consumption of other parties.

Potential Gross Domestic Product (GDP)

The real GDP an economy would produce if its labor and other resources were fully employed.

Poverty

The state of being poor, variously defined. Sometimes defined relatively--by reference, for example, to the average household income in a nation or region. Sometimes defined absolutely--by reference, for example, to the income needed to provide for adequate food, housing and clothing in a nation or region.

Premium

The fee paid for insurance protection.

Price

The amount people pay when buying a good or service.

Price Ceiling

A legally established maximum price that may be charged for a good or service.

Price Ceilings and Floors

Protection against economic risks, such as unemployment, accidents on the job, business failures or natural disasters, over which people have little or no control.

Price Discrimination

Charging different customers different prices for the same good or service.

Price Elasticity of Demand

The responsiveness of the quantity demanded of a good or service to changes in its price. The price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price.

Price Floor

A legally established minimum price that may be charged for a good or service.

Price Level

The weighted average of the prices of all goods and services in an economy; used to calculate inflation.

Price Stability

The absence of inflation or deflation; a broad social goal and criterion for measuring the performance of an economic system.

Prices of Inputs

Principal

An original amount of money invested or lent.

Private Good

A good that provides benefits only to the purchaser.

Private Property

A basic institution in a market economy, private property involves the right to exclusive use, legal protection against invaders and the right to transfer property to other. Property rights are defined, enforced and limited through the process of government.

Producer Surplus

The difference between the price firms would have been willing to accept for their products and the price they actually receive.

Producers

People and firms that use resources to make goods and services.

Product

Something manufactured or refined for sale.

Production

The act, process or result of manufacturing or refining something.

Production Possibilities Frontier

A table or graph that shows the full employment capacity of an economy in the form of possible combinations of two goods, or two bundles of goods, that could be produced with a given amount of productive resources and level of technology.

Productive Efficiency

A firm operating where it produces a given quantity and quality of goods at the lowest possible cost; also known as technical efficiency.

Productive Resources

Natural resources, human resources, capital resources, and entrepreneurship used to make goods and services.

Productivity

A measure of output per unit of input.

Profit

The money a business has left over after selling its goods and services and paying its costs of production. Not to be confused with revenue.

Profit Maximization

Where MR = MC; profit is at a maximum when marginal revenue equals marginal cost.

Profit Motive

The desire to make money which motivates or causes people to work hard to produce goods and services.

Progressive Tax

A tax that take a larger percentage of income from people in higher-income groups than from people in lower-income ones; the U.S. federal income tax is an example.

Property Rights

Legal protection for the boundaries and possession of property. Assigning of property rights to individuals, collectives or governments depends on the economic system.

Proportional Tax

A tax that takes the same percentage of income from people in all income groups.

Public Goods

Goods, often supplied by the government, for which use by one person does not reduce the quantity of the good available for others to use, and for which consumption cannot be limited to those who pay for the good.

Public-Choice Analysis

The study of decision making as it affects the organization and operation of government and other collective organizations. Involves the application of economic principles to political science topics.

Purchases

In a credit arrangement, the total amount spent during the billing cycle.

Purchasing Power

The amount of goods and services that a monetary unit of income can buy.